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Waiting on Stimulus Common Stocks Don’t Know What to Do

Almost without doubt equity markets are waiting on stimulus from congress. Like a junky looking for their next ‘fix’ this market is built on the Fed printing press and the big spenders in the government. Actually after all the months of crazy large gains in common shares it is nice to see a little reality come into the picture.

Income investors aren’t seeing many bargains in issues above average quality. The average $25/share preferred or baby bond is off just 1.3% this week–and given the level income issues have been trading at most are still at sky high levels—although given the other options available it is understood. Watching the utility issues, where I would like to buy, we have seen a 1% drop in values–still presenting a pretty lousy yield to call picture, but maybe that is simply the way it will be in the future. A number of commenters have noted the low coupons that are being garnered in the bond market–30 year notes down in the 2.5-3% area–why issue high coupon preferreds?

The big losers this week are some of the ‘junky’ issues–i.e. Hersha Hospitality (HT) preferreds, which are trading with suspended dividends. Each of their issues (3 of them) are off $1/share. Honestly the junky issues are just getting ‘put in their place’–trading down where they should be given the high risk they present.

I remain in the 70% area and continue to look for bargains–although I may be looking for a long time. We’ll see if congress rides in on their white horse to save the day—if not bargains may yet appear.

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